CORRECTED-UPDATE 2-India's Infosys to pay $34 million in U.S. visa case

Source :

Last Updated: Fri, Nov 08, 2013 12:40 hrs

(Corrects the location of Everest Group consultant in 15th
paragraph as Gurgaon, not Mumbai)

* Company had reserved $35 million for settlement

* Infosys says no limit on eligibility for U.S. federal
contracts

By Harichandan Arakali and David Ingram

BANGALORE/WASHINGTON, Oct 30 (Reuters) - Tech services giant
Infosys Ltd agreed on Wednesday to pay $34 million to
end a U.S. investigation related to the widespread practice by
Indian firms of flying workers to client sites in the United
States on temporary visas.

The settlement, which the U.S. Justice Department said was
the largest in a case of alleged civil fraud over visas, was
filed in U.S. District Court for the Eastern District of Texas.

Infosys, India's second-largest IT services exporter, agreed
in the settlement that it committed civil violations of U.S.
employment law, but it was not required to admit and did not
admit widespread further wrongdoing.

"Infosys denies and disputes any claims of systemic visa
fraud, misuse of visas for competitive advantage or immigration
abuse. Those claims are untrue and are assertions that remain
unproven," Infosys said in a statement.

The company emphasized that the allegations were not
criminal, and that there would be no limitations on its
eligibility for U.S. federal contracts or access to U.S. visa
programs as a result of the settlement.

The Justice Department had alleged in court papers that
Infosys knowingly and unlawfully sent people to work without
proper visas, that there were widespread failures in the
company's record-keeping and that the company tried to deceive
U.S. consular officials with false "invitation letters", which
tell the government the purpose of travel.

One invitation letter from May 2010 for someone identified
in court papers as "AR" said the person "would be involved in
meetings and business discussions," but the real purpose of the
trip was for computer coding and programming, the Justice
Department said.

One reason the Justice Department decided to settle its
allegations rather than try to prove them at trial was that
Infosys took steps to fix irregularities and agree to outside
monitoring, said U.S. Attorney John Bales of the Eastern
District of Texas.

Bales said the Justice Department had anecdotal evidence
that problems with I-9 forms - used to verify employment
eligibility - and visa forms were common in the tech services
industry. While he would not confirm that there are other open
cases, he said others should pay attention to the Infosys
settlement.

"They do acknowledge that there are problems with their I-9
process, and that however it happened - unintentional or not -
their visa practice had some irregularities," Bales told Reuters
in a phone interview. "They have pledged to be more accurate."

"We've learned a lot in the case, and we're going to use
that knowledge," he said.

U.S. lawmakers are considering legislation that would make
it more difficult and costly for Indian IT firms to send workers
to the United States on temporary, restricted visas.

Infosys employs roughly 15,000 people in the United States.
As of March 31, about 10,800 of those were on H-1B visas, which
allow an employee to stay and work in the United States up to
six years, and 1,600 were on temporary L-1 visas, a company
filing said.

The U.S. investigation focused on the use of B-1 business
visas and I-9 forms, Infosys has said. A person on a B-1 visa in
the United States can participate in meetings but is not allowed
to work.

"It is likely to add more fuel to the ongoing debate around
visa reforms," Chirajeet Sengupta, practice director in Gurgaon,
near New Delhi, at Everest Group, which advises clients on
technology vendors, said on Tuesday after reports that a
settlement was imminent.

"These reforms, if executed, have the potential to impact
Indian service providers' landed resource model that is largely
driven by access to H-1B visas in large numbers," he said.

In its statement, Infosys said only .02 percent of the days
that Infosys staff worked on U.S. projects last year were
performed by people on B-1 visas.

"The Company's use of B-1 visas was for legitimate business
purposes and not in any way intended to circumvent the
requirements of the H-1B program," the Bangalore-based company
said.

Infosys has secured roughly one B-1 visa for every 10 H-1B
visas, according to a person with direct knowledge of the matter
who declined to be identified.

U.S. authorities had been looking into Infosys' use of visas
since 2011. This month, Infosys set aside a reserve of $35
million, including legal fees, as it worked towards a resolution
of the U.S. investigation.

The case is "an important event in the annals of Indian IT
industry," Sundararaman Viswanathan, a consultant in Bangalore
with Zinnov, which advises U.S. corporations on sending
outsourcing work to India, said ahead of the settlement.

"This is a common issue amongst all the Indian service
providers - just that Infosys had to deal with it," he said.

"Though the Indian service providers do not intend to flout
the visa regulations, there was definitely a lack of regard for
certain norms and procedures. This will be fixed. There will be
an increase in onsite hiring," he said.
(Writing by Tony Munroe; Editing by Sonya Hepinstall)